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How Are EPC (Energy Performance Certificate) Requirements Changing?

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Until now Energy Performance Certificates (EPC) have been little more than a footnote in the housing market. However, EPC requirements are changing and they’re already showing signs of getting people hot under the collar.

At the end of last year, the government announced changes to the Minimum Energy Efficiency Standards for England and Wales.

So how are EPC requirements changing and what impact is that going to have on our homes? Let’s take a look.

What is an EPC?

An EPC is the official rating of the energy efficiency of a building. Ranging from the very best (A) to the least efficient (G).

Every property on the market must have an EPC in its sale particulars. Also, every tenant must be given the EPC for their rental home when they move in.

The problem with old housing stock

We have a lot of different types of houses in this country. In many cases, very old with poor insulation!

For example, a stone cottage has no room for cavity wall insulation. A house with an unconverted loft may have poor lagging in the roof.

It’s estimated 60 per cent of British homes have an EPC rating of D, E, F or G. While a high proportion of modern homes, by contrast, return A, B and C ratings.

Why EPCs are becoming more important

There are two reasons why EPC’s are increasingly important:

  1. Gas and electricity prices are set to rise in 2022 as the government’s cap on energy suppliers’ charges is lifted. Expect some whopping utility bill hikes, I’m afraid, and common sense dictates that the more energy-efficient a home, especially with very good insulation, the less fuel it takes to heat and the lower our bills will be.
  2. New laws will likely require everyone who owns a home (owner-occupiers and landlords) to create energy efficient homes. Helping the government meet all-important emission targets to reduce global warming.

The prospect of these new laws is already impacting the market.

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Targets and deadlines for better EPCs

Owner-occupiers have a clear incentive to improve energy efficiency. A home with a good EPC will be increasingly attractive to buyers. I’m noticing younger homebuyers pay more attention to EPCs than older buyers used to.

In addition, there are ideas (not yet laws) to link taxes like stamp duty to EPC rating. So the better the EPC the lower the stamp duty and the quicker a home might sell.

But when it comes to landlords, whose properties house 20 per cent of the population, these targets are specific and tough.

Currently, energy performance certificates for rental properties must be at least E-rated. However, the government wants to increase this to a minimum of a C rating for new tenancies from 2025. And for all rental properties (even those with long-standing tenants in place) by 2028. 

On top of that, although not yet confirmed, the minimum EPC rating for rental property will rise again, to a minimum B, from 2030!

Are There Exemptions?

Yes, but not many.

The most obvious exemption is for listed buildings or buildings with restricted covenants, where energy efficiency improvements would unacceptably alter their appearance.

Some temporary homes, or those in use for less than four months a year, are also exempt.

There’s also a rental cost cap for landlords who cannot improve a property to the required minimum EPC of £3,500 or less. They can make improvements up to that sum and then register an ‘all improvements made’ exemption.

The Market Impact

Rightmove reported, from a study of 200,000 homes last year, that sellers who upgraded their EPCs to a C (from a D, E, F or G) got up to 16 per cent more on their sale price. 

And rental sector trade bodies report that some landlords are already selling up because they fear they could not afford the improvements needed. Especially on older properties and especially if the £3,500 cost cap is increased.

Of course, we all want to combat global warming but it’s crucial to avoid targets that are so strict that many owners find them too expensive or too disruptive.

The unintended consequence could be fewer homes available to rent, and some owner-occupied houses and flats that are difficult to sell to cost-conscious purchasers.

My guess is that some targets will be softened (there’s already talk in government circles) but even so ‘energy’ will be an increasingly big factor in the market this year, and for the long term.

It’s hot stuff – and getting hotter.

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Last Updated: October 18th, 2023